Analyst presentation: 2013-2017 business plan

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Analyst presentation: 2013-2017 business plan

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Analyst presentation: 2013-2017 business plan

  1. 1. Index Business plan up to 2017 Business Plan update Recent developments Strategy Strategic targets vs. 2012 Ebitda growth drivers Remarkable step forward Ebitda by strategic areas Network Waste Energy Capex Financial performance Geographical expansion Swap participation with ENI Share capital increase Closing remarks 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Annex Assumptions Change in Governance Consolidated Group Ebit Financial Strategy Sustainable Development Network details Waste details Energy details Business plan by business Portfolio mix Disclamer 20 21 22 23 24 25 28 30 31 35 36
  2. 2. Introducing business plan update with recent events 4 -22m€ impact mainly in waste Supportive achievements of last 6 months to be included in BP to 2017
  3. 3. Recent developments influencing business plan update to 2017 5 Coincident wave of relevant changes on all businesses Regulatory “review” • Review of Gas supply prices (“CCI”) • Gas Distribution new tariffs (4th regulatory period) • Change on renewable incentives (CIP6/CEC) • New transition water tariff system Macro economic scenario Persistently negative scenario determines a rebound of Italian GDP slower than expected. Real estate industry in still negative outlook. Consumptions still decreasing with competition on lower demand. Antitrust position on JV with ITG Antirust “red light” to the Joint Venture between Acegas Aps and Italgas in Veneto/Friuli determinates a review of Hera strategy to face gas tenders in the area. M&A and portfolio review • Acegas Aps and Energonut mergers (+5m€ Ebitda) • Rationalization of peripheral shareholdings (total value of 140m€) • New opportunities for consolidation (e.g. ENI swap participation, Amga Udine) -21m€ Ebitda impact +5m€ Ebitda impact -22m€ Ebitda impact +10m€ Ebitda impact
  4. 4. 3 Continuing to keep on course, sticking to our strategy 6 Focus on efficiency gains Activities reorganisation (divisionalization), streamlining Group structure. Rationalization and Cost Cutting. Exploiting synergies from mergers. “Adapt and react” Expand downstream Leveraging upon core services, focusing quality, customer relations and cross selling with a multi-regional scope “Exploit new reference markets” Merger & Acquisition Execute deal in progress Pursue M&A selecting new opportunities “Create value through M&A strategy execution” Adapting and reacting keeping focus on profitable growth 2 4 Strengthening regulated asset base Maintain control of networks on ref. territory and investing in efficiency “Going for a low risk profile” 1
  5. 5. Regulated business: 58% Ebitda ~75% of Group capex 12 gas tenders in ref. territory • POD: +178K • Ebitda: +19m€ Efficiencies Reorganization & Cost rationalization: +20m€ Ebitda Energy customer base: 2.2 m clients Electricity: up to ~1 million Gas: about 1.3 million M&A • Acegas Aps: Integration activities on track • Amga Udine & portfolio reshuffling: Ebitda: +10m€ (net impact) • Aimag: Ebitda: ~44m€, ‘12 Net debt: 100 m€ 99                                                    114Ebitda/Employee (’k€) EPS cagr. +5.0% 3.3x                                      2.9xD/Ebitda Main strategic targets versus 2012 3 1 2 4 Synergies from M&A: +30m€ Ebitda 7
  6. 6. 662 951 +129 +30 +57 +19 +54 300 500 700 900 2012 Acegas APS 2012 Merger synergies Organic Gas tender M&A + reshufling E2017 Ebitda growth leveraging upon “all” drivers Gas tenders Confirming current gas distribution concessions (implying fulfilment of current territories served by Hera with additional 178k POD) M&A Aimag (waiting for political election H1’14). Review on peripheral activities. M&A in new reference territories. Organic MergerSynergies +7.5% Cagr.  Waste treatm. new plant: +26m€ Network :+7% POD/employee Reorganisation +10m€ Ebitda Network mgmt 19% Waste operations 24% Energy trading & sales 18% Procurement and G&A 39% Regulated tariff increases 8
  7. 7. Remarkable step forward in business size 9 Gas sold & traded (bcm) 3.5 3.4 Electricity sold (TWh) 9.5 ~10 Energy clients (m unit) 1.7 2.2 Sector Key Industrial targets 2012 E2017 Volume of waste treated from 3rd parties (m ton) 3.3 5.3 Urban waste collected (m ton) 1.7 2.3 Network length (‘000 km) 73.1 86.7 Gas POD (m unit) 1.2 1.8 Heat sold (GWht) 530 643
  8. 8. Ebitda by strategic areas 10
  9. 9. 310 486 +86 +13 +28 +19 +30 250 450 2012 Acegas '12 Merger synergies Organic Gas tenders M&A E2017 2.3 3.2 +0.6 +0.2 +0.1 0 2012 Acegas 2012 Gas Distrib Water E2017 11 Ebitda breakdown (m€) +176m€ RAB evolution (b€) Focus on enhancing returns Allocating capex on safe activities with stable cash flows Tender schedule NETWORKS: Strengthening “roots” in reference territory Focus on proper investments to enhance RAB and asset efficiency Efficiencies Confirm market position Focus on leakages/efficiency. Enhance “smart” grid management. Bid to confirm all concessions on reference territory leveraging upon consolidated and leading market shares. Looking for opportunistic options Focused capex: 1.34b€ M&A Integrate activities from mergers +0.9b€
  10. 10. 184 311 +31 +10 +68 +19 0 200 400 2012 Acegas '12 Merger synergies Organic M&A E2017 Ebitda breakdown (m€) +127m€ 1.6 3.0 0 1 2 3 4 2012 E2017 12 Value extraction from all drivers Repositioning to support expansion in the “nation wide” special waste market Urban waste treatments focus on value 30% special waste market share in ref. areas 9% 18% 30% 23% 19% landfill select/recyc WTE 3rd parties Compost Other 1,7 2,1 0 1 2 3 2012 E2017 S. W. mkt in reference areas (mton) S. W. Hera volume treatm. (mton) M&A EfficienciesAsset mix toward recycle/recover Reduce waste mgmt cost. Improve treatment cost efficiency. Squeeze more value from waste Develop market share Integrate activities from mergersDevelop special waste mkt, and confirm current concessions on waste collection Asset fine tuning and restructuring focusing on plant that enhance value of waste (selection, bio- digester/bio mass). WASTE: Adapting and reacting in an evolving scenario 1 4 2012 demand: 10.5 Reference territories Urban Waste Volumes (mton) Treatment mix
  11. 11. 151 135 +11 +6 (41) +7 0 200 400 2012 Acegas APS merger synergies Organic M&A E2017 ENERGY: Progress on down stream development 13 Enhance marketing intelligence to tackle with changing scenario “Soft landing” on market change Ebitda breakdown (m€) Gas upstream: TAP project Key targets 1.3 1.1 2.2 2.3 0 0.5 1 1.5 2 2.5 3 3.5 4 2012 E2017 Direct supplies National 1.4 1.7 8.8 8.9 -1 1 3 5 7 9 11 2012 E2017 Own production Market 3.5 3.4 10.2 10.6 Gas supply 1.1 1.3 Cross selling and expand markets control churn rate. Rebalancing customer mix. Selective customer policy. Tackle with margin squeezeMidstream position M&A Manage pricing. Reduce cost to serve. Integrate activities from mergers with multi-utilities targeted. Flexible procurement strategy keeping short in upstream. Control working capital. Expand market 0.5 1.0 Sources (bcm) Customers (m) Electricity supply 2012 2012 E2017E2017 (16m€)
  12. 12. Capex plan: 1.9b€ to sustain low risk growth and efficiency gains 14
  13. 13. 0.09 ~0.11 2012* E2017 Financial performance EPS cagr. (€) Returns (%, b€) E2017 Cash flows (m€) Financial ratios +5% Cagr 2012 E2017 ROI +554 +171 (383) Operating cash flows Capex & Investments* Free cash flows 2012 E2017 FFO/Debt* 3.3x 2.9x 2012 E2017 Debt/Ebitda *Normalised by one off tax benefits related to prior years 2012 E2017 EBIT (m€) 335 500 NIC* (b€) 4.1 5.3 *Net Invested Capital *FFO calculated as the sum of reported net profit + D&A + provision (non adjusted) 8.2% >9% 17,5% 20% * Related to current Group perimeter 15
  14. 14. Geographical expansion in fragmented new reference territories Aimag - Mirandola Amga - Udine Gas sold (mcm) 315 Gas POD ('000) 156 Water sold (mcm) 10 Financials 2012 (m€) Revenues 367 Ebitda 29 Ebit 12 Net Profit 4 Net Debt (84) Gas sold (mcm) 211 Gas distributed (mcm) 275 Water sold (mcm) 15 Financials 2012 (m€) Revenues 220 Ebitda 44 Ebit 21 Net Profit 10 Net Debt (86) Moving fast following M&A strategic principles Swap Partecipation Est Reti Elettriche Isontina Reti Gas Financials 2012 (m€) Ebitda 1 Net Debt (4.5) POD (unit) 22K Financials 2012 (m€) Ebitda 5 Net Debt (20) POD (unit) 59K Agreement (Acegas Aps) Trieste Padua 16
  15. 15. Swap with ENI on Gorizia shareholdings From 01/01/14 to 31/03/14 Acegas Aps has a call option to step up to 100% in Isontina Reti Gas in the event that Italgas doesn’t exercise it’s call option to purchase ENI stake. 17
  16. 16. Shares to issue Up to 80 million shares (share capital move from 1,342.8 to about 1,422.8 million shares). The increase is 5.6% (or 1/17) on share capital (post increase). Price issue Price set the day before the issue. Price range: A) 1.25€ if average market price of 30 days (“Pavg30”) before the share issue is 1.55€>Pavg30>1.25€. B) Pavg30 – 0.05€ if Pavg30< 1.25€ Option rights Around 1 right for every 17 old shares. FSI commit to buy all un-opted rights. Schedule of share capital increase Share holdings FSI first step into Hera shareholding Current shareholdings Post capital increase new shares 5.6% 10% 11% 46% 38% 1,423m shares 48% 41% 1,343 m shares 18
  17. 17. Closing remarks 19 Confirming Strategy Strengthening Assets Creating value Dividend policy confirmed Sector Consolidation Strengthening Shareholding structure • Pursuing multi-utility strategy aiming at a positive growth through all drivers available • Capex plan ’13-’17 focused on strengthening regulated asset base and maintaining short upstream • Targeting +5% EPS growth and increasing financial soundness; value creation in a multi-stakeholder approach • Targeting a floor of 9€c DPS and full coverage of dividend payments with cash generation within 2017 • Expanding in reference territory through deals both in Friuli region (Amga Udine and participation swap with ENI) and Emilia Romagna region • FSI shareholder by the end of the year Adapting and reacting to keep on course
  18. 18. ANNEX: Business plan 2013-2017 Further Group details
  19. 19. 2012 E2015 E2017 Brent (Dollar/Barrel) 112 105 105 Exchange ratio €/$ 1.29 1.33 1.32 PUN (€/MWh) 75.5 66.8 69.0 Inflation (%) 2% 2% 2% Italian GDP trend (%) (2.4%) +1.0% +1.0% Green certificate (€/MWh) 81 87 85 CEC (Cip6 avoid cost) (€/MWh) 87.6 80.3 81.0 White certificates (€/TEP) 87 81 82 CO2 certificates (€/ton) 7.6 10.0 10.0 WATER services revenues (Cagr ’12-’17) +5.5% GAS distribution revenues (Cagr ’12-’17) +5.3% ELECTRICITY distribution revenues(Cagr ’12-’17) +9.4% WASTE collection revenues(Cagr ’12-’17) +6.4% Assumptions 20
  20. 20. Change in Governance Share capital develop. Hera Group Board of Directors Hera municipalities Acegas Aps municipalities Other shareholders Hera post Acegas Public offer Hera post FSI 1.343 m shares 1.423 m shares 20 Bod members 21 Bod members 15 Bod members 2013 2014 21 New shares
  21. 21. 64 71 175 22 500m€ Consolidated Group Ebit Ebit 2012 Ebit E2017 334m€ By strategic area By Business 335m€ 22
  22. 22. • Maintain financial liabilities homogeneous with investment time horizons • Non speculative financing • Optimize mix variable/fixed to stabilise related cash flows Financial Strategy Refinancing needs to 2017 (m€) Pursuing balanced interest nature Average debt cost Hera Group financial strategy Rates 23 E2013 E2017 Average rate 5.1% 5.6% Variable rate 3.6% 4.6% Fixed rate 6.2% 6.7%
  23. 23. Sustainable development Electricity production – renewable (GWhe) Thermal energy production – renewable (GWht) CO2 emission avoided (ton) Low emission vehicles 24
  24. 24. ANNEX: Business plan 2013-2017 NETWORKS (further details by strategic area)
  25. 25. Networks internal growth drivers (1) Avg. revenue per m3 of water distributed (€/m3) Total gas revenues (m€) Total electricity revenues (m€) +1.1% Cagr Visible and safe tariff enhancement Hera heating production sources (excl. leakages) (GWht) Increase volume sold to new customer (new urbanization) Efficient sources for heat production Waste contribution to increase heat gen. Increase of margins/environmental perf. Benefitting from new asset base Efficient thermal energy production386 510 +3.8% Cagr 38% 19% 11% 11% 21% 32% 19% 10% 16% 23% E2017 Ebitda of D.H. expected to increase by +10m€ (from 13m€ of 2012) 25 +5.3% Cagr +9.4% Cagr
  26. 26. District Heating (POD/Employee) Economies of scale in networks management +5.9% Cagr Networks internal growth drivers (2) 26 Electricity (POD/Employee) +1.4% Cagr Gas (POD/Employee) +1.7% Cagr Water (POD/Employee) +1.7% Cagr
  27. 27. Networks targets Ebitda breakdown (m€) 112 153 27 43 158 266 13 23 310 486 2012 E2017 Gas distrib. Electricity distrib. Water D.H. 27
  28. 28. ANNEX: Business plan 2013-2017 WASTE (further details by strategic area)
  29. 29. Hera growth strategy and waste market expansion +10.8% Cagr +4.8% Cagr Hera sales volumes (kton) Market expansion +8.8% Cagr Expand geographical scope Increase “full service” contracts Focus on value added treatments Leverage upon domestic plant shortage Identified key target MKT Competitive commercial offers (full service) Stable urban waste volumes due to slow down in consumptions Increase sorted collection to 63% 7.397 4.856 453 (172) 106 481 1.104 568 2012 WTE Landfill Compost Che/phy., disidr. Selction/RDF Other 3rd plants E2017 Hera Treatment capacity (k ton) Fully integrate value chain Mix of treatments (kton) +2,541 Kton 28
  30. 30. Waste treatment capacity and energy generation enhancement Green certificates (m€) GC quantity (GWh) 309 359 GC price (€/ MWh) 81 85 2 83 35 11 8 11 4 10 4 Other  Landfill Che/phy., disidr. Com post Digesters W TE Inhertis. M od/therm al2012 2012 Waste assets: 1.1b€ (20% of inv. capital) Renewable Power generation (GWh) 29
  31. 31. ANNEX: Business plan 2013-2017 ENERGY (further details by strategic area)
  32. 32. Keeping a balanced and effective energy upstream strategy Ebitda breakdown (m€) • Gas Sales and Trading activities expected to benefit from M&A contribution more than offsetting negative projections on current sales & trading margins (due to progressive alignment of commodity cost component – “CCI” – to gas spot prices included in retail sales prices). • Electricity Sales and Trading activities affected by a projected reduction in volume sold to “salvaguardia” clients. 30
  33. 33. ANNEX: Business Plan 2013-2017 (by business)
  34. 34. M € 2012 E2017 Cagr. Ebitda 183,5 311,0 +11,1% Waste business Economics Capex ’13-’17: 480m€ (m€) Ebitda breakdown (m€) Highlights 2012 E2017 Tariffs (€/ton) Volume treated Urban (kton) Special (kton) Hera prod. (kton) 246 291 1,771 1,559 1,527 2,241 3,049 2,106 31
  35. 35. Water business Economics Capex ’13-’17: 610m€ (m€) Volume sold* Highlights 2012 E2017 Volumes (mm3) 253 319 2012 E2017 Leakage Tariff (€/m3) 27.0% 25.1% 1.8 1.9 M € 2012 E2017 Cagr. Ebitda 158,3 266,4 +11,0% 32 * Civil acquduct+ industrial acqueduct
  36. 36. M € 2012 E2017 Cagr. Ebitda 240,7 258,1 +1,4% Gas business Economics Ebitda breakdown (m€) Capex ’13-’17: 631m€ (m€) Highlights 2012 E2017 Networks (kKm) Tariffs (€c/m3) 15.3 18.7 7.4 7.2 33
  37. 37. M € 2012 E2017 Cagr. Ebitda 62,3 96,0 +9,0% Electricity business Economics Ebitda breakdown (m€) Capex ’13-’17: 187m€ (m€) Highlights 2012 E2017 E. sold (TWh) E. distr. (TWh) E. contracts (K) E. tariffs (€c/KWh) 9.5 9.9 2.2 3.2 541 946 2.62.4 34
  38. 38. Portfolio mix Business Portfolio breakdown 35 Ebitda E2017 951m€ Liberalized 42% Regulated 58%
  39. 39. Disclaimer This presentation contains forward-looking statements regarding future events (which impact the Hera Group’s future results) that are based on current expectations, estimates and opinions of management. These forward-looking statements are subject to risks, uncertainties and events that are unpredictable and depend on circumstances that might change in future. As a result, any expectation on Group results and estimates set out in this presentation may differ significantly depending on changes in the unpredictable circumstances on which they are based. Therefore, any forward -looking statement made by or on behalf of the Hera Group refer on the date they are made. The Hera Group shall not undertake to update forward-looking statements to reflect any changes in the Group’s expectations or in the events, conditions or circumstances on which any such statements are based. Nevertheless, the Hera Group has a “profit warning policy” , in accordance with Italian laws, that shall notify the market (under “price-sensitive” communication rules) regarding any “sensible change” that might occur in Group expectations on future results. 36

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